Yes, you can sell your insolvent company, in many circumstances, this must be done with an Insolvency Practitioner’s consent, either as a general element of an administration or as a pre-pack sale.
When your company has a lot of debt but isn’t yet formally insolvent, you can still start promoting it and sell it. Nevertheless, whether you try to sell the company’s assets or its stock, this is probably going to be challenging.
A buyer will almost definitely be extremely suspicious that the transaction could be disputed by creditors, especially if the sale is quite inexpensive.
Selling a company with large debts to a friend, relative, known business associate, or anyone else at a loss is exceedingly dangerous. The transaction might later be annulled, and you might even be held personally liable.
Give us a call, send us an email, or use the live chat if you need guidance on what is or is not recommended.
In this article, we’ll look at how to portray your insolvent company in the best light to draw investors and get the greatest outcome for both your company and yourself.
Selling a Business in Administration or Liquidation
When a company is facing financial difficulties and is under fear of or is being subjected to legal action, it comes into administration. Administrators are now given charge of the failing business, and their goal is to serve the interests of the creditors.
If the company can be sold, this might enable it to carry on with business, preserving employees and upholding current contracts.
Selling Assets from a Company in Liquidation
Investors can still purchase the company’s assets, such as property investment, cars, or merchandise, even though the business cannot be sold as a whole in a liquidation.
The insolvency practitioner, who is legally compelled to employ an impartial valuer, such as a chartered surveyor, manages the sale of any assets.
5 Tips for Selling an Insolvent Company
No matter how many or how few interested parties there are, it’s crucial to get everything ready and ready to go in order to demonstrate the genuine worth of your company.
Here are some helpful actions you can take:
- Highlight the value in your company – An investor can choose to buy into in a failing business before the administration process, or wait for an administrator to be appointed to potentially buy it more cheaply. Your role in this process is crucial. By demonstrating the value in your business, you can help to secure the most favourable resolution for you and your business.
- Sell the business before reaching insolvency – If a failing business is purchased before a formal insolvency procedure begins, the current structure of your business may have worth and could be preserved more readily. Additionally, your company may be servicing lucrative ongoing contracts that could be lost if an insolvency procedure is started.
- Maintain accurate financial information – Potential buyers will profit greatly and get the comfort they require if you are able to give a prospective buyer or investment current and precise financial records and predictions.
- Encourage management buy-in – If a company has a cohesive management structure that is devoted to making it work, turning around that company will be simpler. A passionate and determined board can propel the business forward to swiftly get it back on track after the root of the issue has been fixed.
Conclusion
Selling an insolvent company can be a complex process that involves finding a buyer willing to take on the company’s debt and financial challenges. The first step in selling an insolvent company is to assess the company’s financial situation and determine the cause of its insolvency. This may involve working with financial experts such as accountants or turnaround specialists to identify areas of the business that can be improved or restructured to make it more attractive to potential buyers.
Once the financial situation has been assessed, the next step is to find a buyer for the company. This may involve working with business brokers or investment bankers to market the company to potential buyers. It’s also important to consider whether the company should be sold as a going concern or whether it should be sold for its assets.
The buyer will conduct due diligence on the company’s financials, assets and liabilities. If the buyer decides to move forward, the sale of the company will be completed through a purchase agreement.
It’s important to note that selling an insolvent company can be a difficult and time-consuming process, and it may not always be possible to find a buyer willing to take on the company’s financial challenges. In some cases, the best option may be to liquidate the company’s assets and distribute the proceeds to creditors.
If you company is insolvency and you are wanting to sell it, simply complete the online enquiry form and one of our team will talk you though the process.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.